Norway's SWF Posts Q2 Loss Due to European Debt Crisis, BP Spill

(August 13, 2010) — Norway’s oil fund dropped $25 billion in the second quarter, pummeled by the European debt crisis and BP’s downturn after the Gulf of Mexico spill.

The Government Pension Fund Global, Norway’s sovereign wealth fund commonly known as the “oil fund”, lost 155 billion kroner ($25 billion) or 5.4% in the second quarter, representing the first drop since the start of 2009.

The single worst-performing investment for the world’s second largest SWF: oil producer BP. The company’s oil spill in the Gulf of Mexico in April, the largest spill in US history, slashed BP’s share price in half during the period. Following the oil disaster, the fund said oil majors have the potential to improve environmental safety standards, indicating that it was seeking a greater effort by the oil industry. “This is an industry-wide issue and the industry needs the larger players with the best resources (to achieve this),” said Yngve Slyngstad, chief executive officer of Norges Bank Investment Management (NBIM), which manages the fund, in a Reuters interview.

“The spill put the spotlight on safety standards in the oil industry,” says Slyngstad. “NBIM supports the board of BP’s commitment to ensure that safe and reliable operations top the company’s set of priorities. We also seek a wider industry effort that should be led by the largest companies to improve safety and environmental standards.”

Additionally, Norges Bank said Friday that the fund’s equity investments returned -9.2%, while fixed-income investments returned 1%. The fund’s investments consisted of 59.6% equities and 40.4% fixed-income securities at the end of the quarter.

Despite the loss, the fund grew year-on-year to 2.8 trillion kroner ($455 billion), from 2.4 trillion kroner, central bank data showed.